Eight Tips for Taxpayers Who Owe Taxes
While most taxpayers get a refund from the IRS when they file their taxes, some do not. The IRS offers several payment options for those who owe taxes
Here are eight tips for those who owe federal taxes.
1. Tax bill payments. If you get a bill from the IRS this
summer, you should pay it as soon as possible to save money. You can pay by
check, money order, cashierís check or cash. If you cannot pay it all, consider
getting a loan to pay the bill in full. The interest rate for a loan may be less
than the interest and penalties the IRS must charge by law.
2. Electronic Funds Transfer. Itís easy to pay your tax bill
by electronic funds transfer. Just visit IRS.gov and use the Electronic Federal
Tax Payment System. You may also use EFTPS to pay your taxes by phone
3. Credit or debit card payments. You can also pay your tax
bill with a credit or debit card. Even though the card company may charge an
extra fee for a tax payment, the costs of using a credit or debit card may be
less than the cost of an IRS payment plan. To pay by credit or debit card,
contact one of the processing companies listed at IRS.gov.
4. More time to pay. You may qualify for a short-term
agreement to pay your taxes. This may apply if you can fully pay your taxes in
120 days or less. You can request it through the Online Payment Agreement
application at IRS.gov. You may also call the IRS at the number listed on the
last notice you received. If you canít find the notice, call 800-829-1040for
help. There is generally no set-up fee for a short-term agreement.
5. Installment Agreement. If you canít pay in full at one
time and canít get a loan, you may want to apply for a monthly payment plan. If
you owe $50,000 or less, you can apply using the IRS Online Payment Agreement
application. Itís quick and easy. If approved, IRS will notify you immediately.
You can arrange to make your payments by direct debit. This type of payment plan
helps avoid missed payments and may help avoid a tax lien that would damage your
Taxpayers may also apply using IRS Form 9465, Installment Agreement Request. If you owe more than $50,000, you must also complete Form 433F, Collection Information Statement. For approved payment plans the one-time user fee is $105 for standard and payroll deduction agreements. The direct debit agreement fee is $52. The fee is $43 if your income is below a certain level.
6. Offer in Compromise. The IRS Offer-in-Compromise program
allows you to settle your tax debt for less than the full amount you owe. An OIC
may be an option if you can't fully pay your taxes through an installment
agreement or other payment alternative. The IRS may accept an OIC if the amount
offered represents the most IRS can expect to collect within a reasonable time.
Use the OIC Pre-Qualifier tool to see if you may be eligible before you apply.
The tool will also direct you to other options if an OIC is not right for you.
7. Fresh Start. If youíre struggling to pay your taxes, the
IRS Fresh Start initiative may help you. Fresh Start makes it easier for
individual and small business taxpayers to pay back taxes and avoid tax liens.
8. Check withholding. You may be able to avoid owing taxes in
future years by increasing the taxes your employer withholds from your pay. To
do this, file a revised Form W-4, Employeeís Withholding Allowance Certificate,
with your employer. The IRS Withholding Calculator tool at IRS.gov can help you
fill out a new W-4.
For more information about payment options or IRS's Fresh
Start program, visit IRS.gov. Also, see Publications 594, The IRS Collection
Process, and 966, Electronic Choices to Pay All Your Federal Taxes, for more
information. Get publications and forms at IRS.gov or by calling
Additional IRS Resources:
Electronic Payment Options Home Page
Payments (payment options)
Form 9465, Installment Agreement Request
Publication 594, The IRS Collection Process
Publication 966, Electronic Choices to Pay All Your Federal Taxes